Thanks to the worst data breach ever, we all get an amazing new crime-fighting tool.
I’ve spent most of my life in Florida, where hurricanes are a sad fact of life. Here’s what few non-Floridians know: After a hurricane, the weather is beautiful. The skies are clear, and the temperature is perfect.
It’s often that way in the financial world where I’ve spent more than two decades as a CPA and financial counselor. Consider the massive Equifax data breach, which was first revealed a year ago this month.
While no one is sure how much data hackers made off with, 146 million Americans had their personal information exposed. When you consider there were only 323 million Americans in the entire country, that’s a record-setting data breach.
The winds pick up
What made it even more startling is that Equifax is one of the Big Three credit bureaus. Along with Experian and TransUnion, they collect details on nearly every debt you ring up, from credit card balances to mortgages. This information determines your credit score.
If any business should be air-tight with your personal data, it’s this one. Even worse, at the time of the breach, Equifax was selling a service called the Complete Premier Plan. For $19.95 a month, it promised to “Help monitor your credit and Social Security Number” — for, you know, hackers trying to steal that precious information.
After the storm
Even worse, the best way for those 146 million Americans to protect themselves wasn’t free. It’s called a credit freeze. Depending on where you lived, it could cost up to $30. Now Congress has stepped in and made them free for everyone.
What’s a credit freeze? It allows you to tell those Big Three credit bureaus to stop releasing your information to new lenders. In practical terms, this means no one can open a new credit card or take out a car loan in your name.
The following transcript is for the featured video titled: “Why Credit Freezes Are Important”
CPA Howard Dvorkin: People’s Social Security numbers are getting out there in the public domain. And criminals are out there utilizing them. In order to help consumers, Congress decided to pass a bill that protects the consumer by allowing a credit freeze to go onto their credit history.
Personal finance column writer Jessica Patel: You know, I really like the fact that they made it free for individuals and they’ve also made it a lot easier. Because even as early as three to five years ago, if you wanted a credit freeze you would’ve had to make a phone call, you’d have to wait, you’d have to fill out all of this information, you’d have to mail stuff in. Now you fill out a form online.
CPA Howard Dvorkin: Actually, you would have to make three phone calls, because all of the three major credit bureaus: Equifax, Experian, and Transunion were not interconnected.
Personal finance column writer Jessica Patel: It costs different amounts in each state. You know, and each one, whether it was Experian, Equifax or Transunion and they all charged different prices. Not only that, the only people who were able to get it for free were actual victims of credit fraud that could prove it with a police report. So now you’re sending and faxing police reports to three different people just waiting to freeze your credit, forget about unfreezing your credit, by the time your up to unfreezing your credit it’s going to take you another two weeks. So, if you need to buy a new car because you just got into a car accident, you’re going to be waiting at least two weeks to get your credit unfrozen, so you could then be accepted.
CPA Howard Dvorkin: The credit freezes are a necessity now because every day you hear of one company after another getting their information was taken and you just don’t know. You could everything 100 percent right as a consumer but you’re still at risk. And the fact to the matter, and I have had many conversations with many computer security people, and they always tell me, Howard, if somebody wants to get in and take your information, they’re going to get in and take your information. They may not get in from you, but they can get in from your kids going on the wrong website. It’s a very challenging world that we live in and people need to protect themselves as much as they can.
Personal finance columnist Jessica Patel: I think it’s a really great opportunity that credit freezes are so easy, especially for the elderly and children. Fraud has risen astronomically for child identity fraud because people can easily get their Social Security number and open up credit underneath them, when it’s not until they are 18 and they have to get a credit card that they realize ‘oh my gosh, I can’t get any credit, my credit’s been destroyed, I didn’t know any of this was happening.’ So, now this gives an opportunity for parents to check if their child has a credit account on file, because children usually don’t have a credit file. They can create one and then freeze it until children are old enough to access credit when they become of age.
CPA Howard Dvorkin: Children are absolutely at risk, and sometimes, by people they wouldn’t expect, which in my experience has been sometimes their parents. And similar with similar names: John Smith and the third and he’s the second. Children, unfortunately, don’t figure out that daddy or mommy have ruined their credit until they become of age and they try to get credit issued to them. We see that quite often and we see that it destroys the fabric of the family.
Personal finance columnist Jessica Patel: And for the second part of that for the elderly as they get older, they’re not opening new lines of credit, or they shouldn’t be opening new lines of credit. And really to protect them because there is so much elderly fraud going on that this really gives them the opportunity, whether you’re their children who is helping them by freezing their credit or whether it’s themselves who says ‘I’m not going to buy anything. My house is paid off, my credit cards are where they’re at, I don’t need any new cars, I just want to freeze my credit because it’s going to protect me.
CPA Howard Dvorkin: With the elderly, let’s face it you may have some household help and the caretakers we find that not only are the caretakers taking care of mama, but they’re also taking care of mama’s bank account. And unfortunately, they’re giving them the keys to the kingdom and we see that especially living down in South Florida, we see a lot of elderly abuse go on and certainly with their bank accounts and a lot of criminal activity around that. It is a very big challenge as the graying of America continues. But certainly, freezing the credit of every single elderly person is not a bad idea, and it needs to happen. I would love to say that maybe down the road it’s an automatic not an option, which I think would mean more protection for the consumer. However, I’m pretty sure I’ve got three credit bureaus with many lobbyists who don’t want to hear that idea because it would definitely slow them down and reduce their ability to gain access to those people’s credit histories.
Personal finance columnist Jessica Patel: I really provide amazing protection for those individuals. I think for, you know, those who are in middle age buying cars and buying houses and still opening up credit cards more often, maybe they should consider more of like a credit lock that makes it a little bit easier to freeze and unfreeze their credit. Credit cards aren’t as utilized especially by the younger demographic of the population now. I think the fact that they’re being offered the credit freezes now, whether they take it or not, it’s just there for them. It’s something that’s there for you to take If you want to take those extra protections. It allows you to kind of lock and unlocks your credit easier. Kind of just holds off on it so you can’t unlock new stuff, but you can easily unlock it. And others offer it for a fee, so if you want to undo it immediately on your phone, they could do it and they’d charge a fee. So, they’ve now found a way to monetize it but just in a different way, which is smart on their behalf. It’s also still providing the availability to the consumer. So, If you know you’re going to be buying a home, you know, you can unfreeze it, you know, you’re not going to buying a home tomorrow.
CPA Howard Dvorkin: There are services. There’s the ID protection, things that are $20 a month, for $30 a month, or the super duper one for god knows how much. There are services available that are out there that make it a little easier for the consumer, but you still have to do something. And the fact of the matter is with all those services, you could do it for free anyway. You’re just kind of paying a convenience fee. But if you think about it even $20 a month adds up to $240 a year and the zombie effect takes place and you keep going on that treadmill so to speak, and you could end up paying a thousand dollars at the end of five year, or however long and there’s always upgrades too. You have to be very careful about those “great” services that are out there.
That’s how identity thieves make money from your personal data. They open up new lines of credit, spend all of it, and disappear in the night. Imagine finding out your name is suddenly on a dozen maxed-out credit cards. Sadly, like hurricanes, this disaster strikes millions.
After Equifax was hacked, it sheepishly offered free credit freezes. Congress, which has a reputation for doing little, was motivated by this huge crime to do something real and useful. It passed a law that all three credit bureaus, not just Equifax, must offer free credit freezes whenever consumers want them.
Now it’s nice out there
So how do you set up a credit freeze? It’s easy…
- Go to each of the three credit bureaus’ freeze pages: Experian, Equifax, and TransUnion.
- You’ll get a PIN that lets you remove the freeze whenever you want.
Keep in mind, the freeze affects you, too. You can go to those three pages and, using your PIN, grant a creditor “one-time access” to your file. This allows you to sign up for a new credit card or mortgage or any other line of credit you seek.
Preparing for the next storm
Credit freezes are very similar to boarding up the windows as a hurricane approaches. It’s not something you do all the time. You probably don’t want to live your life under a credit freeze.
Just like living in hurricane country, you want to monitor the weather. You should constantly scan your credit reports, looking for errors and unusual activity. You can order your report from each of the three bureaus once a year for free. Just go to annualcreditreport.com.
I recommend you pull one report every four months, so you get the latest look at your personal data. I also suggest you look into an identity theft protection service. There are many out there. I like Debt.com’s Identity Theft Protection because it’s free for the first 30 days, and if you don’t like it or don’t think it’s necessary, you can easily cancel.
By the way, the new credit freeze goes into effect Sept. 21. The middle of hurricane season.
Read more: How to Place a Credit Freeze.